Sovereign Wealth Fund

What is a sovereign wealth fund?

A sovereign wealth fund (SWF) is a state-owned investment fund created by the revenues from commodity exports and transfers of foreign exchange reserves. Rather than let capital sit in the nation’s central bank, the SWF invests it in the global financial markets to return a profit and benefit the economy.

Where have you heard about sovereign wealth fund?

Whilst many sovereign wealth funds invest in government bonds, others, sometimes known as sovereign investment funds make direct investments in foreign companies. At the height of the financial crisis in 2008, many SWFs made significant investments in banking groups such as UBS, Morgan Stanley and Citigroup.

What you need to know about a sovereign wealth fund.

Sovereign wealth funds are some of the largest pools of capital in the global financial markets. As of 2017 they totalled $7 trillion, with the largest being Norway’s $975 billion oil fund. In 2017, Norway’s fund was 65 per cent invested in equities and held on average 1.3 per cent of every listed company in the world. Oil funds such as Norway’s and those of the Gulf states aim to return a profit but also to diversify the risk to their economies from the price of oil. Others, such as China’s $814 billion China Investment Corporation, utilise their vast foreign currency reserves.

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